Key points of investment:

Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company's revenue was 1.038 billion yuan (+7.15% YoY), net profit attributable to mother was 17.18 million (+131.63% YoY), net profit after deduction of 24.24 million yuan (YoY +130%), 2024 Q3 revenue 0.278 billion yuan (YoY -13.2%), net profit to mother 5.3 million yuan (YoY +178.49%), deducted Non-return net profit of 2.71 million yuan (YoY +133.50%). The results exceeded expectations.

Rapid growth in export business+improved operating efficiency is the main reason why the company's performance exceeded expectations. Looking at the revenue structure level, revenue from domestic stock varieties declined in the first three quarters due to the full implementation of interferon harvesting in Jiangxi. Domestic cooperative products (infliximab) had an 80% increase in revenue over the same period of the previous year, and the export business grew steadily, achieving sales revenue of 0.149 billion, an increase of 47% over the full year of 2023. Export sales in the third quarter benefited from the delivery of new products, showing an accelerated growth trend; better profit performance than revenue was mainly due to the company's lean management of the entire business process and improved operating efficiency. During the reporting period, sales expenses and unit production costs all decreased compared to the same period of the previous year, and R&D investment declined year-on-year. The main reason was that clinical and outsourcing expenses were reduced compared to the same period last year.

Continue to accelerate the overseas commercialization process — major breakthroughs have been achieved in sales in the EU market. (1) The company's introduced product, albumin paclitaxel, obtained marketing approval from the European Commission in July 2024, achieved the first batch in August, and sales orders in the EU continued to increase. According to the EMA announcement, white purple is in short supply in most regions of the European Union. The successful achievement of sales revenue in the EU marks the extension of the company's global sales regional footprint from the dominant region in emerging markets to the EU market; (2) the company's self-built albumin paclitaxel production line has passed the EU registration, which is conducive to increasing the gross profit margin of albumin paclitaxel sales; (3) the company has established a new German subsidiary, which will strongly promote the sales of albumin paclitaxel in the EU and the UK.

Continue to accelerate the overseas commercialization process — the expansion of emerging markets has achieved remarkable results. Sales and registration of introduced products accelerated in emerging markets. In the third quarter, the company achieved the first shipment of infliximab to Peru, adalimumab completed on-site GMP inspection by the Philippine Drug Administration, bevacizumab completed an online audit by the Pakistan Drug Administration, and liraglutide completed on-site GMP inspection by the Colombian Drug Administration. Product introduction continues to focus on the fields of oncology, immunity, and metabolism. Global product selection will be introduced to EU sales regions and emerging markets.

Optimistic about the company's overseas business and maintains a “buy” rating. Based on the company's results for the first 3 quarters, we raised our 2024 profit forecast. We expect net profit to be 0.02 billion yuan in 2024 (previously estimated at 8 million), keeping the profit forecasts unchanged for 2025 and 2026. We expect net profit to be 0.108 billion and 205 million yuan for 2025 and 2026, respectively. The current market value corresponds to the 2025-2026 PE of 33 times and 17 times, respectively. Maintain a “buy” rating.

Risk warning: risk of delays in overseas review progress, risk of sales volume falling short of expectations, risk of exchange rate fluctuations.